The Monetary Policy Committee (MPC) has unanimously voted to hike the official rate by 0.25% from 0.5% to 0.75% – the second increase in just under a decade.

Interest rates have been historically low since the crash of 2008 plunged Britain and the world into financial dire straits, leading to bank bailouts, business closures and soaring household debt.

The decision means the interest rate will be risen to its highest level since March 2009, when it dropped from 1% to 5% as a result of the financial crisis.

The decision, voted on by members of the nine-strong MPC, will have wide-ranging implications for mortgage owners, borrowers and savers in the coming years.

In short, costs will increase for hard-up businesses and consumers who have borrowed money, while savers will get higher returns from banks.

Economists fear that the rate increase could risk a debt crisis as households struggle to keep up with payments on credit cards, overdrafts, personal loans and mortgages.

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HIKE: The Bank of England has raised interest rates to 0.75% – the highest level in a decade

In a speech after announcing the decision, BoE governor Mark Carney said rising inflation fuelled by economic growth and an increase in demand justified the rate rise.

"With domestically-generated inflation building and the prospect of excess demand in the economy emerging, a modest tightening of monetary policy is now appropriate to return inflation to its 2 percent target, and to keep it there," Carney said.

Britain’s economy was running at its “speed limit”, he said, meaning more interest rate rises might be necessary to keep inflation under the BoE’s 2% target.

In terms of economic performance, the MPC said the growth rate is expected to leap from 0.2% in the first quarter to 0.4% in the second.

Justifying the decision, the MPC said:"The MPC continues to judge that the UK economy currently has a very limited degree of slack.

"Unemployment is low and is projected to fall a little further.

"In the MPC’s central projection, therefore, a small margin of excess demand emerges by late 2019 and builds thereafter, feeding through into higher growth in domestic costs than has been seen over recent years."

High street banks base the interest rates they charge consumers and reward borrowers on the Bank of England’s rate.

He said economic concerns related to leaving the European Union have not gone away as fears over a “no deal Brexit” suggest weaker growth ahead for Britain.

A rate rise was postponed after analysis showed Britain’s economy wasn’t ready following weak growth caused by the “Beast from the East” in winter.

However, the economy has bounced back in spring and summer, with the royal wedding, England’s World Cup run and the nice weather boosting consumer spending.

Meanwhile, Inflation rose by 2.4% in the year to June, meaning more expensive goods and services.

High inflation paired with low wage growth has led householders to borrow in greater numbers as they struggle to keep up with expenses.

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HISTORIC: Interest rates are set to be pushed up to the highest levels in a decade

Households borrowed £1.6 billion in unsecured credit in June, ballooning outstanding borrowing to a record of £213.2 billion, Bank of England figures show.

The base rate rise will be keenly felt by households walking a "budget tightrope", experts have warned,

For many millennials, the base rate rise will be the first taste they have had in their adult lives of a figure above 0.5%.

The move spells rising costs for borrowers, and it comes a week after Office for National Statistics (ONS) figures showed households became net borrowers last year for the first time in nearly 30 years.

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Households across the UK spent or invested around £900 more on average than they received in income during 2017, according to the ONS.

Phil Andrew, chief executive at StepChange Debt Charity, said: "Whilst a rise in interest rates might be right for the wider economy, from a consumer debt perspective many households are walking a precarious budget tightrope, as their incomes don't stretch to cover the basics each month.

"These are the households that a rate rise will affect most. Policymakers mustn't lose sight of what a rate rise means for real people on a tight budget."